Published:
June 28, 2024
Link copied

What is Invoice Discounting? Here's Everything You Need To Know

Invoice discounting enables you to take out a loan using unpaid invoices as collateral.

The loan amount typically ranges between 80% to 95% of the value of the invoices, which you will pay back (with interest) once you receive payment from your customers.

Invoice discounting example
  • You have outstanding invoices valued at $10,000.
  • An invoice discounting company agrees to lend you 80% of the total invoice value.
  • The lender will also charge a fee (to cover its risks, interests and other costs). It will be repaid along with the capital.

In this example, you will be given $10,000 x 80% = $8,000 of cash. After you have collected on the invoices, you will pay back $8,000 plus the agreed fee to the lender.

Grow your business with Choco Up

Check eligibility

Related blog posts

Financing & Funding

Should I Choose Equity Financing or Business Bank Loans?

Bank loans and equity financing can support your business goals in different ways. Explore the difference to know what’s the right next step for you.

Read more
Financing & Funding

Why Timing Matters: When to Seek Growth Capital for Your E-commerce Business

Learn the key stages of startup funding and when is the best time to seek out growth capital to scale your e-commerce business.

Read more